Equinor and Shell Agree to Tanzania LNG Plant

Equinor ASA and Royal Dutch Shell Plc said they’re committed to a project that will allow the export of natural gas from Tanzania.

Proposals to build a $30 billion liquefied-natural-gas plant, in gestation since 2014, have been clouded by policy uncertainty in Tanzania’s extractives industry. Investor thoughts towards the East African nation have been soured by the government’s overhaul of mining legislation that’s enabled it to renegotiate contracts.

A spokeswoman for Shell, Sally Donaldson, said “For now, the focus is on agreeing to the Host Government Agreement that is to set the legislative, regulatory and fiscal terms for the project,”

Before a final investment decision is reached, an engineering study must be conducted that will last about two years and cost hundreds of millions of dollars, she added. The completion of the plant is expected to take five years.

Nel, an analyst at NKC Africa Economics in Paarl, South Africa said Negotiations on the HGA have been continuing “for some time, and the actual commencement of construction seems to be a long way off,” said Jacques.

“The government’s hard-line approach to dealing with large foreign investors in the natural resources sector also puts a dampener on foreign investor sentiment, particularly when considering the magnitude and timelines of LNG investments,” he said.

According to Kapuulya Musomba, the government is working on ways to allow the project to proceed, acting managing director of the Tanzania Petroleum Development Corp. In April, it invited bids for a transaction adviser to negotiate terms of the project, which was originally scheduled for completion in 2020.

“We would like to see this project happen,” having already spent $2 billion on exploration, said Torgrim Reitan, Equinor’s executive vice president for development and production. “What we need now is clarity on the commercial framework. When that is settled then it will allow us to move forward.”